Correlation Between Titan Company and American Leisure

Can any of the company-specific risk be diversified away by investing in both Titan Company and American Leisure at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Titan Company and American Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Titan Company Limited and American Leisure Holdings, you can compare the effects of market volatilities on Titan Company and American Leisure and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Titan Company with a short position of American Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Company and American Leisure.

Diversification Opportunities for Titan Company and American Leisure

0.27

Correlation Coefficient

Titan Company  American Leisure

Modest diversification

The 3 months correlation between Titan and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and American Leisure Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Leisure Holdings and Titan Company is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Titan Company Limited are associated (or correlated) with American Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Leisure Holdings has no effect on the direction of Titan Company i.e., Titan Company and American Leisure go up and down completely randomly.

Pair Corralation between Titan Company and American Leisure

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the American Leisure. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 18.8 times less risky than American Leisure. The stock trades about -0.05 of its potential returns per unit of risk. The American Leisure Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.02  in American Leisure Holdings on December 30, 2024 and sell it today you would lose (0.01) from holding American Leisure Holdings or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Titan Company Limited  vs.  American Leisure Holdings

Titan Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Company is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

American Leisure Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Leisure Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, American Leisure demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Company and American Leisure

The main advantage of trading using opposite Titan Company and American Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company position performs unexpectedly, American Leisure can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Leisure will offset losses from the drop in American Leisure's long position.

The idea behind Titan Company Limited and American Leisure Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.